What High Earners Need to Know About the 2026 SECURE Act 2.0 Changes for their 401ks
As we look ahead to 2026, a significant change is coming to retirement savings plans that could impact those earning higher incomes. The SECURE Act 2.0, passed in late 2022, includes a provision that will alter how certain individuals make catch-up contributions to their 401(k) plans.
Here’s what you need to know and how to prepare.
🔍 What’s Changing?
Starting January 1, 2026, if you are age 50 or older and earned more than $150,000 in FICA wages from your employer in the previous year (2025), any catch-up contributions you make to your 401(k), 403(b), or governmental 457(b) plan must be made as Roth contributions—not pre-tax.
This means:
- Your catch-up contributions will be after-tax, but your earnings will grow tax-free.
- You’ll pay taxes now, but enjoy tax-free withdrawals in retirement when qualifying distributions are received.
- If your employer’s plan does not offer a Roth option, you won’t be able to make catch-up contributions at all unless the plan is updated.
👥 Who Is Affected?
You are impacted if:
- You’ll be 50 or older in 2026.
- You earned more than $150,000 in FICA wages from your current employer in 2025.
- You plan to make catch-up contributions to your retirement plan.
This income threshold will be adjusted for inflation in future years. [irs.gov]
🛠️ What Should You Do Now?
- Review Your 2025 Income
If you expect to earn over $150,000 prepare for the Roth requirement. - Check Your Plan’s Roth Option
Not all plans currently offer Roth contributions. If yours doesn’t, talk to your HR department or plan administrator about adding this feature. - Update Payroll Elections
Ensure your payroll settings are aligned with Roth contributions starting in 2026. - Consult Your Financial Advisor
We’re here to help you evaluate how this change fits into your broader retirement and tax strategy, looking for other ways to potentially offset the loss in your current year tax deductions.
🧾 Why This Matters
While this change may increase your taxable income in the short term, it also presents a powerful opportunity for long-term tax-free growth. For many high earners, Roth contributions can be a strategic way to diversify retirement income sources and manage future tax liabilities.
🗓️ Timeline & Compliance
- The IRS has confirmed that the Roth catch-up rule takes effect in 2026, with no further delays.
- Employers and plan sponsors must update plan documents and payroll systems by December 31, 2026, but the rule applies to contributions made starting January 1, 2026. [irs.gov]
💬 Let’s Talk
If you have questions about how this change affects your retirement planning—or if you’re unsure whether your plan is ready—reach out to us. We’re committed to helping you navigate these updates with confidence and clarity.
📞 Contact us today to schedule a review of your retirement strategy.
PPG-8596405.1(11/25)(Exp. 11/29)